SAP C-TPLM30-67 Q&A - in .pdf

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  • Exam Code: C-TPLM30-67
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NEW QUESTION: 1
Oils Galore is a large firm that prefers to use the Successful Efforts method of accounting. A similar firm, Rival Oil & Gas, Inc., uses the Full Cost method. An inspection of their financial statements would reveal that:
I. Oils Galore has a higher debt-to-asset ratio.
II. Rival O&G has higher equity.
III. Oils Galore is burdened with higher taxes.
IV. Rival O&G shows higher cash flows.
A. III & IV
B. I & II
C. II & IV
D. I & III
Answer: B
Explanation:
Explanation/Reference:
Explanation:
The Successful-efforts method requires expensing of all dry-hole costs while Full Cost method allows these to be capitalized. Therefore, Rival shows higher assets, higher income and hence, higher taxes. It also shows higher equity. Since Rival pays higher taxes, it has lower cash flows.

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